Relative PPP

Relative Purchasing Power Parity (PPP) is an economic concept that compares how exchange rates between two countries' currencies change over time, based on the inflation rates in those countries. If one country experiences higher inflation than another, its currency is expected to depreciate relative to the other, maintaining the purchasing power of both currencies. In essence, relative PPP suggests that differences in inflation rates drive the movement in exchange rates, helping to explain why currencies fluctuate in value over time in relation to changes in domestic inflation levels.